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Einhorn sues Apple amid tussle over preferred stock issuance

David Einhorn, whose hedge fund Greenlight Capital and its affiliates own about $610m worth of Apple stock, on Thursday sued the iPhone and iPad maker in an effort to block a proposal by a fellow shareholder that he argues could limit how the company could return some of its $137bn cash pile to investors.

Apple is proposing to require a shareholder vote at its annual general meeting on February 27 before it can issue preferred stock, a kind of security that Einhorn is urging the company to adopt. The prominent investor contends that the S&P 500-listed firm should distribute a "perpetual preferred" stock that could pay a dividend yield of 4% - higher than the 2.3% yield currently carried by Apple's regular shares, according to FactSet.

Greenlight's lawsuit, filed in a New York federal court, argues that Apple is violating a securities rule by bundling three items - including the preferred stock matter - under one proposal.

The preferred stock dividends can be “a unique solution” to the “intractable problem” of how Apple rewards its shareholders, Einhorn told The Wall Street Journal, stressing that the measure will enable the firm to retain cash and yet allow investors “to recognise value".